Generalized Social Marginal Welfare Weights Imply Inconsistent Comparisons of Tax Policies

Itai Sher ()
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Itai Sher: University of Massachusetts Amherst

No 2021-009, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: This paper concerns Saez and Stantcheva's (2016) generalized social marginal welfare weights (GSMWW), which are used to aggregate losses and gains due to the tax system, while incorporating non-utilitarian ethical considerations. That approach evaluates local changes in tax policy without appealing to a global social objective. However, I argue that local comparisons between different tax systems implicitly entail global comparisons. Moreover, whenever welfare weights are not of a utilitarian kind, these implied global comparisons are inconsistent. Part of the motivation for the GSMWW approach is that it provides a way to incorporate broader ethical judgements into the evaluation of the tax system while preserving the Pareto principle. I suggest that the problems with the approach ought to spark a reconsideration of Pareto if one wants to represent broader values in formal policy analysis.

Keywords: welfare weights; optimal taxation; utilitarianism; Pareto principle (search for similar items in EconPapers)
JEL-codes: D63 H21 H23 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-pbe, nep-pub and nep-upt
Note: MIP
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Citations: View citations in EconPapers (2)

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http://humcap.uchicago.edu/RePEc/hka/wpaper/Sher_2 ... marginal-welfare.pdf First version, February 15, 2021 (application/pdf)

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